17 June 2016

ACCA: The New Accounting Directive: A harmonised European Accounting Framework?

EU experts discussed the implementation of the Accounting Directive, which represents the culmination of a debate addressing the accounting acquis in Europe and incorporates within it some 100 Member State Options.

The European Federation of Accountants and Auditors for SMEs (EFAA) conducted a survey of its member bodies in eight EU member states. It provides an insight into the likely effect of the Accounting Directive implementation, how those Member State Options (MSOs) have been exercised and other issues that have arisen. EFAA, with the support of ACCA chose Brussels to launch this report and initiate a lively debate on the consequences of the Accounting Directive implementation with experts.

The EFAA report shows some areas where most of the surveyed countries have implemented the Directive in a similar way, especially in establishing a reduced disclosure regime for micro entities. However, the overall picture is one of considerable variation in the use of the member state options across the different countries and one of reduced transparency of SMEs because of the decline in financial information available about them on the public record.

Bodo Richardt, EFAA President said “Harmonisation is not only needed by the global payers, but also by smaller entities, especially those investing or operating across borders and located in border regions. The deficiencies in both harmonisation and comparability that the EFAA survey illustrates seem likely to provide impediments to SME development”.

“Common standards are essential. Comparability is very important, both for the completion of the Capital Markets Union programme, envisaging a comparable financial reporting system for SMEs on alternative markets and also as a common information base for credit applications, and for consumer protection purposes”, Bodo Richardt added.

Marie Lang, co-author of the report, and Director of Professional Development at EFAA said “The debate revealed that accounting by SMEs across Europe is going to be little harmonised, and that the initial aim of the Directive was unlikely to have been met. There is no escape from the fact that users looking at the accounts of companies across Europe will have to exercise considerable care in reading, interpreting and comparing the information they contain”.

Richard Martin, co-author of the report, Chair of the EFAA Accounting Expert Group and Head of Corporate Reporting at ACCA explained: “It should not be forgotten that the Directive is silent on many accounting treatments such as for example on leases, deferred tax and pension obligations. This means that there will be further differences and lack of harmonisation”.

“Also, in the framework of EU action against tax avoidance, which is very high on the agenda, both internationally and at EU level, the forthcoming Common Consolidated Corporate Tax Base proposal may be an important component. Any common corporate tax base to help with tax avoidance or the debt/equity bias would have to start with a common accounting basis”, Richard Martin concluded.

Full press release

© ACCA - Association of Chartered Certified Accountants